There
are many ways to improve the economy. Our Congress – people we elected
– moan and groan saying they can’t do anything about national
monetary policy or make the marketplace user friendly for job creation.
That is untrue. They have control… what they don’t have is
the cojones to exercise it. For example, many experts believe the Federal
Reserve Act of 1913 is illegal.

On what is this argument
about the legitimacy of the Federal Reserve System based?

Article I, Section
8 of the United States Constitution says that “The Congress shall
have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay
the Debts and provide for the common Defense and general Welfare of the
United States; but all Duties, Imposts and Excises shall be uniform throughout
the United States.” And here’s where it gets interesting.
The Constitution says the Congress has the power “To borrow Money
on the credit of the United States.” Oops. How did a private corporation
called the Federal Reserve inherit that responsibility? Section 8 also
says the Congress “shall have Power… to coin Money, regulate
the Value thereof, and of foreign Coin, and fix the Standard of Weights
and Measures.” Since the Federal Reserve, a private corporation,
does these things… isn’t it unconstitutional?

Well, politicians
and lawyers will argue and tell you that the Federal Reserve Act of 1913
makes it legal for the Congress to turn its monetary responsibilities
as described in the Constitution over to the Federal Reserve.

Here’s an easier
question for you to answer: In 1970, how old did an American citizen have
to be to vote? Answer: 21. How did they lower the constitutional requirement
that you had to be 21 to vote… how did 18 year olds get the vote?
On June 22, 1970, then-President Richard Nixon signed a law making the
voting age 18 in all federal, state and local elections. The States of
Oregon and Texas challenged the law. The Supreme Court declared unconstitutional
those parts of the law requiring states to register 18-year olds for state
and local elections. Justice Hugo Black said: “I would hold that
Congress has exceeded its power in attempting to lower the voting age
in state and local elections.”

That Supreme Court
ruling, then, meant states had to provide separate voting rolls for people
between ages 18 and 21. It basically determined the Congress had the right
to tell 18 year olds they could vote in federal elections, but states
had the right to determine how old someone must be to vote in state elections.
Special ballots created for those between the ages of 18 – 21 would
create an election nightmare; so, on March 10, 1971, the Senate voted
94-0 in favor of passing a Constitutional amendment to guarantee the voting
age would be no higher than 18 in all elections. On March 23, 1971, the
House voted 401-19 in favor of the proposed amendment. The amendment was
sent to each of the states and the minimum number of states ratified the
proposed legislation – and the Constitution of the United States
added Amendment XXVI, allowing 18 year olds to vote. Since I don’t
know anyone (other than bankers who profit from the policies of the Federal
Reserve System) who wouldn’t vote to do away with the Federal Reserve
System, this alternative is available to the Congress. All they need is
for a state legislature or two to challenge the Federal Reserve Act of
1913 and get the challenge to the Supreme Court. It would be interesting
to see what today’s “living document” Supreme Court
would do when faced with a 1970’s Court decision that comes down
on the side of states’ rights.

A Supreme Court decision
exists that says the Congress overstepped its bounds – or, as Justice
Black said, “has exceeded its power” – by passing a
law that applied to state and local elections. Many people suggest (myself
included) the Congress “exceeded its power” by passing the
Federal Reserve Act of 1913 because that law extends beyond the federal
to the state level. How does it extend beyond the states to the federal
level? Just one example: To be a “national bank” in Oregon
or Texas (or in any state), a bank is required to be a member of the Federal
Reserve System. Any state, at any time, can challenge the power base of
the Federal Reserve System as it is exercised at the state level. So state
legislators could change things too – if they wanted – just
as Oregon and Texas successfully challenged the 1970 law signed by President
Nixon giving 18 year olds the right to vote. Just because a President
signs a Congressional Act doesn’t make it lawful. If it violates
the Constitution of this country, it is not lawful and becomes what is
called “fruit of the poisoned tree.”

As I have said in
my columns many times, the Federal Reserve System is not part of the federal
government. It is a private corporation (a cartel – like OPEC)…
the only one in America that is exempt from both federal and state taxes.
Well, General Electric (GE) doesn’t pay much in taxes, but that’s
not because of an exemption. That’s because of loopholes –
and that makes one scratch one’s head when one thinks about Obama’s
key economic advisor, Jeffrey Imelt, Chairman and CEO of GE. When one
rewards bad behavior (by honoring one guilty of it with a Presidential
appointment), one should expect more bad behavior.

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The point is, if
the Congress or State Legislatures want to get rid of the Federal Reserve,
they can… just like Texas and Oregon got rid of the 18 year old
voting rights bill that was imposed on them by the United States Congress.
I don’t know anyone who would vote to support keeping the Federal
Reserve System… maybe Alan Greenspan and Ben Bernanke. The states
forced the issue with Congress, they won, and an Amendment to the U.S.
Constitution was required to legalize the 18-year old vote at state and
local elections. The same charge of Congress exceeding its power when
it transferred constitutional authority to the Federal Reserve System
can be made by any state legislature… and a Supreme Court precedent
exists.

A lot of people think
the Congress is being dominated by the banksters… especially the
investment banks on Wall Street. If that’s true, the Congress can
regain control. Do away with the Riegel-Neal Interstate Banking and Branching
Efficiency Act of 1994. Bring back the old McFadden Act which prohibited
interstate branch banking. Give the too big to jail guys time to divest
themselves of the interstate branches and decentralize all of that misbegotten
banking power. McFadden protected us for many years from banks becoming
too big to jail. The point is there are things that can be done to eliminate
the power abuses of the Federal Reserve System —if the Congress
wants to do them. There are things that can be done to put the Congress
back in control of our banking system and our monetary policy. States
can implement a state-owned system of banking… the best possible
example I can think of to decentralize the power of the Federal Reserve.

Until 1980 when the Monetary Control Act was passed, the Glass Steagall
Act protected Americans by preventing commercial banks from giving investment
advice or selling stocks and bonds. Glass Steagall prevented investment
banks – Wall Street brokers, not commercial bankers – from
making loans or taking deposits. These two key financial transactions
credit and investments (especially relative to new product development
on the investment side), like oil and water, do not mix. When they are
mixed, it creates a moral hazard that can result in economic meltdown.
We had a perfect example of that in 2007-08 and are still trying to find
our way out of the economic abyss that was created – some say intentionally
(me among them) – for us. There are too many potential conflicts
of interest for a compatible marriage bed between these two functions.

In a NWV article
April 25, 2010, titled Moral
Hazard Ahead: Beware, I defined “moral hazard” as the
mingling of commercial and investment banking. I stand by what I said
in that article – and in over a year since its publication, those
words have proven themselves true.

If Washington really
wanted to force the too big to jail banks to return to serving the people
rather than servicing them, they would eliminate the Monetary Control
Act of 1980 and re-implement Glass Steagall. It would repeal Gramm, Leach
Bliley, a/k/a the Financial Services Modernization Act of 1999 which was
the death thrust to Glass Steagall. Congress has the power to change things…
if it wants.

Congress likes to
play like it’s not in control… it absolves them from the problems
they create (they think). But Congress holds the reins of power. There
are only two possible reasons why the Congress has passed such utterly
stupid regulations and allowed such weak regulatory oversight of the investment
banking industry – the industry which caused most of America’s
economic trauma: 1) They want to bring the economy of the United States
to its knees and move forward with George Herbert Walker Bush’s
“New World Order;” or, 2) Those who were stupid enough to
get us into this mess aren’t smart enough to understand their complicity
in causing this mess and have no idea how to get us out of it.

We can only assume
that if the Congress isn’t taking action, it’s for one of
three reasons: 1) They don’t understand America’s monetary
system and how financial institutions function sufficiently to cast votes
that impact or change the system; 2) They are more focused on their political
careers than on the economic health of the nation they have taken an Oath
to serve; or, 3) They want the system to fail. The number three choice
would certainly explain the ongoing over-spending that has brought the
United States very, very close to total economic collapse.

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The tribal wisdom
of the Dakota Indians, passed on from generation to generation, says that,
"When you discover that you are riding a dead horse, the best strategy
is to dismount."

Instead of listening
to the wisdom of that voice from the past, we have a political administration
that prefers appointing a committee to study the horse. It wants to provide
more funding to help increase the dead horse’s performance.

We need to clean
the House (and the Senate) in 2012. For part one click below.

Marilyn
MacGruder Barnewall began her career in 1956 as a journalist with the
Wyoming Eagle in Cheyenne. During her 20 years (plus) as a banker and
bank consultant, she wrote extensively for The American Banker, Bank Marketing
Magazine, Trust Marketing Magazine, was U.S. Consulting Editor for Private
Banker International (London/Dublin), and other major banking industry
publications. She has written seven non-fiction books about banking and
taught private banking at Colorado University for the American Bankers
Association. She has authored seven banking books, one dog book, and two
works of fiction (about banking, of course). She has served on numerous
Boards in her community.

Barnewall
is the former editor of The National Peace Officer Magazine and as a journalist
has written guest editorials for the Denver Post, Rocky Mountain News
and Newsweek, among others. On the Internet, she has written for News
With Views, World Net Daily, Canada Free Press, Christian Business Daily,
Business Reform, and others. She has been quoted in Time, Forbes, Wall
Street Journal and other national and international publications. She
can be found in Who's Who in America, Who's Who of American Women, Who's
Who in Finance and Business, and Who's Who in the World.

Well, politicians
and lawyers will argue and tell you that the Federal Reserve Act of 1913
makes it legal for the Congress to turn its monetary responsibilities
as described in the Constitution over to the Federal Reserve.